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EnQuest boost as revenues lift 11% in first half

NORTH Sea-focused EnQuest has increased first-half revenues by 11 per cent to $504 million (£300m), from $456m in the same period of 2013, and said work on the giant Kraken development off Shetland is proceeding to plan.

However, the company has hit complications with a project to revitalise the Argyll oil field, which in 1975 became the first to start production in the UK.

The expected start of production from the renamed Alma Galia development has slipped to mid-2015 from the second half of the current year, after some construction work took longer than expected.

Despite this, the company said: "To date 2014 has been another period of good delivery and progress for EnQuest."

Chief executive Amjad Bseisu said EnQuest's UK North Sea activities are set for substantial growth from new hubs.

These include the Greater Kittiwake area assets it bought from Centrica in October for an initial $40m.

EnQuest is building a new North Sea headquarters in Aberdeen. Its head office is in London.

The rise in revenues followed an 18 per cent increase in production in the six months to June, as EnQuest reaped the rewards for its heavy investment off Scotland. This totalled $425m in the first half.

EnQuest produced an average 25,292 barrels oil equivalent daily in the six months to June, up 18 per cent from 21,455 in the same period last year. It expects full year production to average 25,000 boed to 30,000 boed.

The company invested $114m in existing North Sea assets in the first half, including the Dons and Thistle fields.

EnQuest spent $102m on Kraken, one of the biggest developments in the North Sea for years. The total £4billionn cost will be split with partners, including Edinburgh-based Cairn Energy.

EnQuest said work on Kraken is proceeding on time and on budget. Progress is continuing in Singapore on work to convert an oil tanker into a Floating Production Storage and Offloading vessel.

Work on the FPSO the company plans to use on Alma Galia has not gone so smoothly.

Analysts at joint house broker JP Morgan Cazenove wrote in a note: "Completion of some marine and topside issues have caused construction in the UK yard to move slower than expected."

They said the delay may add around $100m to the capital cost of the project.

Mr Bseisu noted: "Production efficiency has been an important driver of the strong performance from our existing assets in H1 2014 and we see this continuing in the second half of the year."

The growth in revenues powered a four per cent increase in core earnings before interest, tax, depletion and amortisation to $284m from $274m. The cash EnQuest generated from operations increased 36 per cent, to $318m from $235m last time.

The company noted: "With the investment programme in the UK, no material corporation tax or supplementary corporation tax is expected to be paid on UK operational activities before 2020."

EnQuest has started to diversify by acquiring oil and gas asssets in Malaysia and Tunisia.

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